Activity in New Zealand’s services sector, which accounts for about two-thirds of the economy, slowed below its long-term average in August.
The BNZ-Business New Zealand performance of services index fell to a seasonally adjusted 53.2 in August, from 54.8 in July and below the long-run average of 54.5. A reading of 50 separates expanding activity from contraction.
While the survey shows the services sector is continuing its ongoing expansionary phase underway since July 2010, momentum is slowing with the three-month moving average easing to 53.6, well below last year’s average of 57.1 and its lowest level in more than five years.
“The services sector continues to put one foot in front of the other, but there is a clear sense that the rate of progress has slowed down over recent months,” said BNZ senior economist Doug Steel.
That suggests annual growth in services GDP will slip below 2 percent in late 2018 from above 3 percent earlier in the year, he said.
Among the services sub-indices, two key readings declined with activity/sales dropping to 53.8 from 57.7, marking its lowest point since February, and new orders/business falling to 58.8 from 60.
Employment remained flat at 49.9 for a third month, which Steel said implied a clear stalling in service sector employment over the period.
The employment reading could be due to a lack of local of labour demand as pessimistic businesses hunker down, or an increase in the cost of labour including a lift in the minimum wage, or uncertainty around labour relations policy, or because difficulty finding staff is restriction expansion, Steel said.
Some readings did improve in the month, with stocks/inventories advancing to 51.8 from 51 and supplier deliveries increasing to 52.3 from 51.
The report noted that the proportion of positive comments recovered to 56 percent from 53.8 percent in July.
The PSI’s sister survey, the performance of manufacturing index, edged up 0.8 of a point to a seasonally adjusted 52 in August although it also remained below its long-run average of 53.4.
The performance of composite index, which combines the PSI and PMI, fell 1.3 points to 53.2 on a GDP-weighted basis and slipped 0.7 points to 53.1 on a free-weighted basis.